Consumer

• Mixue Group is now looking to raise around US$450m in its upcoming Hong Kong IPO.
• MIXUE Group (MIXUE) is a freshly-made drinks company providing affordable products to consumers, including freshly-made fruit drinks, tea, ice cream and coffee, typically priced at around one USD per item.
• We have covered various aspects of the deal in our previous notes. In this note, we will talk about the IPO pricing.

• Mixue Group (MIX HK), a world-leading manufacturer of freshly made drinks, is seeking to raise US$445 million through an HKEx IPO. 
• According to CIC, Mixue is the largest freshly made drinks company in China and worldwide, according to the number of stores as of September 30, 2024.
• The bull case rests on a strong brand, leading market share, peer-leading revenue growth, top-tier profitability and cash generation. 

• A double dose of StubWorld this week: REA Group Ltd (REA AU)‘s rolls over as CoStar Group (CSGP US) bets big on key rival Domain Holdings Australia (DHG AU).
• Preceding my comments on REA and News Corp (NWSA US) are the current setup/unwind tables for Asia-Pacific Holdcos.
• These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%.

• Mixue Group (MIX HK)  is offering 17.06 million shares at HK$202.50 apiece to raise HK$3.45 billion ($444 million) in its initial public offering in Hong Kong
• Mixue’s IPO was launched today morning  and will close on Wednesday 26th February. The stock is due to list on HK bourses on 3rd March.
• Mixue, China’s value-for-money freshly made beverage leader, has priced its IPO shares attractively given its robust growth track record and long term competitive strengths.

• The fact that few companies promptly retire treasury stock is the reason for the large gap between market capitalization including treasury stock and market capitalization calculated without including treasury stock.
• It’s odd that EV/EBITDA of a company will be smaller after cancelling treasury shares than before, but this shouldn’t be too much trouble for institutional investors who analyze it closely.
• Although this gap may widen for more companies as more cross-shareholdings will be bought back with treasury stock, the increase in share repurchases is a favorable development.

• World may finally have found the key to real growth after years of trying to build a fashion retail business in shopping centres, but with limited success.
• The big problem was that it didn’t have the supply chain skills to compete with the big retailers like Uniqlo and Adastria.
• Buying the supplier that helped grow those same chains means World now has a real chance to enter the big leagues.

• Allied Blenders & Distillers (9844250Z IN) ‘s Q3 FY25 results showed robust growth in revenue at Rs. 2,346 crores (up 15.5% sequentially, 12.9% YoY) and strong premiumisation with expanded export reach.
• Enhanced margins driven by effective cost optimization and profitable state brand mix highlight ABDL’s resilience and ability to capture premium market trends, strengthening its competitive position in India’s spirits industry.
• The company aims to grow the aggregate market share of its four millionaire brands and consolidate its position in the P&A whisky segment through its three millionaire brands

• LCI Industries reported a stabilized financial performance amidst tough market conditions in the RV and marine industries.
• For the full year 2024, the company reported revenues of $3.7 billion, a slight decrease of 1% compared to the previous year.
• Despite headwinds, including a challenging RV and marine market, LCI Industries managed to achieve this minimal decline owing to its diversified business model.

• The Bank of Korea is expected to cut interest rates to 2.75% on 25 February 2025. The decision, however, is not expected to be unanimous and some analysts argue against.
• Historical data from 120 BoK announcements and subsequent moves in the Korea Stock Exchange KOSPI 200 (KOSPI2 INDEX EQUITY) is examined.
• Options market pricing seems to lean toward a “surprise and no-change” outcome. Traders can seek opportunities with short straddles or long puts depending on anticipated outcomes.

• We are reiterating our Buy rating and $40 price target for JAKKS Pacific after the company announced slightly below consensus 4Q24 results, launched a $1.00 annual dividend per share program, and remained confident in their ability to drive solid results, even in the face of tariffs and economic uncertainty.
• We believe, with continued strong licensed products, easy comparisons (especially in 1H25) and upside drivers in international, expansion into the sporting goods channel with Authentic Brands Group (“ABG”) seasonal offerings, The Simpsons and further private label expansion, momentum will remain strong at JAKKS.
• Now with a compelling dividend and a valuation of 4.6X our 2026 EBITDA projection, we believe the risk/reward in JAKK remains compelling, and we reiterate our Buy rating and $40 price target.

• When the deal was announced, I wrote that the MBO for Proto Corp (4298 JP) was opportunistic and was possibly “vulnerable” to activist attentions (original insight here).
• On the 17th, one large active holder Ancient Arts LP filed an amendment to their Large Shareholder Filing showing a change in Reason for Investment. 
• On the 18th of Feb, top independent shareholder Kaname Capital reported an increase in stake and sent Open Letters which appear only now to be circulating. It’s worth a look.

• Kaname Capital, the second-largest shareholder of Proto Corp (4298 JP), has issued an open letter stating that the JPY2,100 MBO tender offer is a bad conclusion at the wrong price.
• Some assertions are valid, while others do not stand up to scrutiny. Kaname claims that Proto is worth JPY3,778, which will make it hard to reach a compromise. 
• Maintaining terms is increasingly not viable. The Chairman is likely to respond by lowering the minimum acceptance condition and/or bumping to secure the support of minorities (excluding Kaname).

• Total revenue growth rate continued to rise in 3Q25 ending March 2025.
• Also, the growth rate of the largest business line, customer management, was close to double digits.
• The upside for the next twelve months was narrowed to 18%, as Alibaba’s stock surged after our preview note.

• In this insight, we discuss about the growing importance of ACT, the largest minority shareholders platform (https://www.act.ag/) in Korea with nearly 100,000 members and market share of more than 50%. 
• Recently, ACT has been demanding corporate governance improvements on the following companies: E-Mart, DB Hitek, Lotte Shopping, Youlchon Chem, Hanmi Science, and Solu-M. 
• ACT has played an important role in the recent shareholder return polices announced by E-Mart which announced a sharply higher total shareholder return policy including higher dividends and share cancellations.

• We believe Kalyan Jewellers (KALYANKJ IN) ‘s FOCO (Franchise Owned, Company Operated) model warrants deeper attention
• Our casual checks question the company’s store expansion narrative vs on ground reality. 
• Our conversation seems to indicate franchisees are financial partners only.

• One of the big thematic events on the Korean stock market has been the expectation that China could lift ban on Korean popular culture (Hallyu) as early as May 2025. 
• China’s President Xi recently stated “Cultural exchanges are a valuable part of our bilateral relations [between China and Korea]. We should avoid any problems occurring in handling such matters.”
• We provide a list of 40 stocks in Korea that could most benefit from the end of lifting ban of Korean popular culture. 

• McDonald’s faced a challenging end to 2024, as its U.S. sales and earnings declined, largely due to an E.
• coli outbreak tied to slivered onions on Quarter Pounders.
• This food safety crisis affected 104 people across 14 states, leading to 34 hospitalizations and one fatality.

• Innova Captab (1605221D IN)’s Q3 FY25 results show modest revenue growth, enhanced EBITDA margins, and a significant manufacturing expansion via the new Jammu facility with innovative dosage forms.
• Improved margins and strategic expansion into new dosage forms enhance competitiveness, setting the stage for 25%+ growth and long-term profitability in the evolving CDMO and generics market.
• The company anticipates Rs. 400 to Rs. 500 crores of incremental revenue from the Jammu facility in the next fiscal year.

• DoorDash’s latest earnings report provides a comprehensive overview of the company’s performance, growth prospects, and strategic initiatives.
• The company showcased strong performance, with significant contributions from both U.S. and international markets.
• Despite the financial statements being marked by improvements and challenges, they highlight the key factors influencing the company’s trajectory.

• Marriott International’s fourth-quarter 2024 earnings reflect a strong performance with continued robust demand translating into a worldwide RevPAR increase of 5% for the quarter.
• Key metrics such as ADR grew by 3% and occupancy improved by over 1 percentage point.
• The company also achieved significant net rooms growth of 6.8% for the year, driven by strategic partnerships and conversions, which contributed significantly to its success.

• PPB Group (PEP MK)‘s grains & agri arm, and four other feedmillers, has been labelled a cartel and fined by the Malaysian competition watchdog. A judicial review is ongoing.
• Preceding my comments on Melco are the current setup/unwind tables for Asia-Pacific Holdcos.
• These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%.

• MIXUE Group Mixue Group is now looking to raise around US$500m in its upcoming Hong Kong IPO.
• MIXUE Group (MIXUE) is a freshly-made drinks company providing affordable products to consumers, including freshly-made fruit drinks, tea, ice cream and coffee, typically priced at around one USD per item.
• In our earlier notes, we have looked at the past performance, undertaken a peer comparison and spoken about valuations. In this note, we refresh the peer comparison.

• The Index Maintenance Sub-Committee of NSE Indices will meet on 21 February to conduct a semi-annual and quarterly review of stocks in various Nifty equity indices.
• The changes will be announced after market close tomorrow and will be implemented at the close of trading on 28 March.
• Based on the forecast index changes and capping changes for a few indices, the round-trip trade will be over US$2.5bn and many stocks will have over 0.5x ADV to trade.

• Tam Jai’s performance in recent years has been consistently below expectations. Its fundamentals have undergone negative changes after IPO. Consumers’ preference change may disrupt Tam Jai’s business model.
• Based on our forecast and the Cancellation Price of HK$1.58/share, P/E will be higher than the industry average. Considering the low trading liquidity and concerns on outlook, HK$1.58/share is acceptable.
• The fundamentals/prospects of Tam Jai are different from the situation of Henlius’ privatization.We recommend investors not reject the privatization easily because internationalization won’t bring significant positive changes in short term.

• China Education Group (839 HK)‘s plunge in share price is due to management’s guidance for a 10-15% drop in adjusted net profit, significantly lower than the current consensus.
• Its decision to pause dividends for the foreseeable future on debt repayment burden and tight offshore refinancing environment for the sector has further disappointed the market.
• Based on guidance, its PER of 3.7x and nil dividend yield for FY25 make it unattractive relative to peers (1.7-2.9x PER). We shy away until things improve.

• Mixue Group (MIX HK) is now looking to raise around US$500m in its upcoming Hong Kong IPO.
• MIXUE Group (MIXUE) is a freshly-made drinks company providing affordable products to consumers, including freshly-made fruit drinks, tea, ice cream and coffee, typically priced at around one USD per item.
• In our earlier notes, we have looked at the past performance, undertaken a peer comparison and spoken about valuations. In this note, we refresh our valuation.

• We are seeing signs that this 2+ month consolidation in the S&P 500 and Nasdaq 100 (QQQ) is ready to break out to the upside. Buy/stay long.
• Part of that is the obvious; both the SPX and QQQ are breaking out to marginal new highs. 
• The other part that has kept us bullish this whole time is that market dynamics have remained risk-on, which we have discussed on a weekly basis.

• MIXUE’s supply chain advantages and economies of scale remain ahead of peers. This creates a unique barrier. When peers engage in price wars, MIXUE can still gain greater cost advantages.
• MIXUE’s performance growth depends significantly on its ability to expand franchised store network. But MIXUE may have reached the growth ceiling in China market based on its current expansion speed.
• The market prefers the franchise models. Despite declining growth rate in the whole industry, MIXUE’s valuation should still be higher than peers – e.g. P/E of 17-20x is comfortable range.

• An emerging leader in online software for the Japanese private education industry, run by a young founder-CEO with skin in the game
• Cheap at just 1.7x EV/Sales with a 20% target operating margin and 20-30% sustainable growth
• Question marks include outsourcing of coding to third-party firms in the PRC, the potential impact of generative AI tools and less-than-ideal capital allocation

• Newell Brands has reported its fourth-quarter and full-year financial results for 2024, demonstrating progress in several areas amid challenging market conditions.
• The company has been implementing a new corporate strategy which has yielded positive outcomes, although it acknowledges ongoing challenges.
• Newell’s key focus for 2024 was to operationalize its new strategy and enhance its culture.

• Mixue Group is getting ready to complete its IPO in Hong Kong in the coming weeks. Mixue Group plans to raise about US$500 million from its Hong Kong IPO.
• The company has an excellent income statement with notable growth in sales and profits in the past four years.
• Net margin improved from 15.7% in 2023 and 18.7% in 1Q-3Q 2024, driven by higher sales base and lower major operating costs as a percentage of sales

• Tam Jai International (2217 HK)‘s privatisation price is lower than we expected, based on 1.37x 12-month forward P/B, against our expectation of 1.63x (the historical average).
• The PER of 21.1x for CY25, a premiuim to sector average of 13.7x, however, looks attractive enough for investors that entered in the last 12 months. 
• The 52.6% discount to IPO price (HK$3.33) and huge net cash have made some early investors unhappy. There is already letter from a minority shareholder calling to vote against it.

• This Insight analyses Alibaba Group Holding (9988 HK) tailor-made option strategies traded over the last five trading days on the Hong Kong Exchange. Strategy highlights and volatility context are provided.
• These traders tailor structures to risk budgets and take calculated bets. Several large box trades appeared on the ticker.
• Expect more movement on Alibaba Group Holding (9988 HK)‘s Q3 earnings announcement tomorrow, 20 February 2025. Option-implied move at the end of this Insight.

• Mixue Group, the largest freshly-made drinks company in China, is reportedly set to begin book building for its Hong Kong IPO by end-February, targeting to raise approximately USD 500 million.
• Mixue Group (MIX HK)‘s mass-market pricing strategy and compelling value for money positioning targets price-sensitive consumers, especially in lower-tier cities and among youth, driving high-volume sales.
• Mixue Group (MIX HK) reported robust revenue and profit growth for first nine months of 2024 led by new store openings and margin expansion despite sector slowdown and intensifying competition.

• Midea is a sound equity investment which is a market leader in the electronics products with just 12.8 trailing PE. 
• China newly launched consumer trade-in policy could become the new driver of Midea’s revenue stream. 
• Overseas business expansion could become the new game changer to re-rate the company’s valuation in the longer term.

• Papa John’s International recently announced their third-quarter 2024 financial results, delineating a mixedperformance.
• The company’s primary focus is set on improving execution, profitability, and sustainable shareholder value.
• Todd Penegor, the recently appointed President and CEO, along with a restructuring inthe leadership team, emphasizes a strategic drive toward refining product propositions, marketing strategies, and technology infrastructure.

• Headquartered in Singapore, Stamford Tyres Corporation Ltd. is a leading player in the global tire industry, primarily involved in the wholesale distribution, retail, and service of tires, automotive parts, and accessories. It is well-known for its extensive network of customers and strong relationships with major tire manufacturers.
• The company has formed strategic partnerships with top tire manufacturers including with Falken, Dunlop and Continental. These collaborations provide Stamford Tyres access to high-quality products and a competitive edge in the market.
• Southeast Asia remains the core market for the company contributing nearly 88% of revenues. Of this, Singapore is the largest market (42% of revenues) followed by Indonesia (18%), Thailand (15%) and Malaysia (10%). Stamford Tyres also generates 10% of revenues from South Africa.

• Total revenues of P$1.8bn were in line with our estimates and increased 18% YoY.
• Housing revenues (95% of total) were up 21% due to a 14% YoY increase in the housing volume and a 6% YoY gain in the average selling price to P$1.2 million.
• Revenues from the affordable and middle-income segments maintain a positive trend, being the main catalyst for the positive results.

• The WK Kellogg Company recently reported its fourth-quarter and full-year 2024 financial results with notable highlights and areas for investor consideration.
• On the positive side, the company successfully progressed its strategic priorities, notably modernizing its supply chain and developing its standalone operating infrastructure following its separation from Kellanova.
• This has already led to improved supply chain performance, with increased operational efficiency and a boost to gross margins, which grew by 90 basis points to 29.8% for the year.

• We are reiterating our Buy rating, projections and $20 price target for Lands’ End after reviewing the February catalog.
• After a small taste last month, swimwear and Spring are the key focuses, with almost 50% of the February catalog swimwear related.
• February demonstrates a continued focus on features to tell a compelling retail story, expansion into more fashion driven silhouettes, creating an outfit driven culture to drive multiple item purchases and positioning Lands’ End as a solutions-driven retailer.

• Today, the closing date of the Tender Offer for Macromill, Inc (3978 JP) by CVC saw the tender offer extended by an extra 10 days with new news.
• Price had been declared final. One very large shareholder had said they would not tender. Two more were negotiating. Those two will now tender and reinvest in the back end.
• This does not mean the tender offer is a done deal, but it is worth examining.

• Base Food (2936 JP) announced a partial tender offer from MBF Acceleration, the largest shareholder.
• The offer is for a maximum of 3.7 million shares (6.97% ownership ratio) at JPY688 per share, a 23.3% premium to the last close price.
• The offer has no minimum acceptance condition, and the price is reasonable. The estimated minimum proration is 21.43%.

• Tam Jai International (2217 HK) announced a scheme privatisation offer from TORIDOLL Holdings Corporation (3397 JP) at HK$1.58 per share, a 75.6% premium to the last close price. 
• The key condition is the scheme approved by at least 75% disinterested shareholders (<10% disinterested shareholders rejection). No disinterested shareholder holds a blocking stake. 
• The offer price is final. While 53% below the IPO price, the offer is attractive compared to peer multiples and historical trading ranges. This is a done deal. 

• After Tam Jai  (2217 HK) was suspended, in Tam Jai (2217 HK) Suspended: Expect Toridoll (3397 JP) To Make An Offer I expected an Offer from TORIDOLL Holdings (3397 JP).
• I also thought an Offer price ~HK$1.50/share would be welcome, but wasn’t hopeful. We got both – a Scheme from Toridoll at HK$1.58/share (best & final).
• Clean deal. Just a question of timing. Docs may be delayed to incorporate FY25E (Mar Y/E) financials. 

• In China, travelers grew by 13% YoY in 4Q24 and 15% in 2024, according to the National Bureau of Statistics.
• We expect total revenue will grow by 19% YoY in 4Q24 and 2024.
• We are confident in the company’s financial performance, but the stock price is overvalued.

• Groupon is a lead generation tool for local service businesses that offers discounted deals.
• The speaker, from the hedge fund Windward, believes Groupon presents a highly asymmetric and convex investment opportunity with potential for a 5 to 1 risk-reward ratio.

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• Discounts likely set for further narrowing as Chinese government adopts a more positive stance towards the private sector (Tencent).
• The discounts of Naspers and Prosus have recovered to levels last seen prior to the publication of the Chinese Military Companies list by the DoD at start of the year.
• Last week Friday, Tencent rallied 7.4% following news that the Chinese government are expected to host a summit with Jack Ma and DeepSeek founder, Liang Wenfeng.

• MIXUE invited experts to conduct calculations based on population data. The result is a maximum of 45,000 stores can be opened. So, MIXUE has reached the growth ceiling in China.
• The pain point is since MIXUE’s growth depends significantly on its ability to expand store network, once the growth of franchised stores slows down, a performance decline would be inevitable.
• Due to larger scale effect/stronger supply chains/higher net profit margin, MIXUE’s valuation should be higher than peers. Higher valuation depends on whether MIXUE is able to make breakthrough in internationalization.

• Tapestry reported strong results for its second quarter, surpassing expectations with record quarterly revenue and earnings per share.
• The company, known for its brands Coach, Kate Spade, and Stuart Weitzman, demonstrated its commitment to strategic brand building and disciplined financial management, resulting in a 5% revenue growth, driven primarily by Coach’s impressive 10% increase.
• Positive aspects of the earnings report include Tapestry’s successful expansion in international markets.

• Ralph Lauren’s third-quarter fiscal year 2025 results reflect a blend of positive momentum and strategic growth, tempered by an acknowledgment of ongoing market challenges.
• The company reported a double digit revenue increase, significantly surpassing its own expectations across all geographies, indicating robust brand momentum and effective strategic investments, particularly noticeable during the peak holiday season.
• This was facilitated by an agile global supply chain that successfully met heightened consumer demand.

• Alibaba Group Holding (9988 HK) stock has rallied bigly over the last month and has gained 55% over that period.
• That has led to Alibaba‘s weight in the HSI INDEX, HSCEI INDEX, HSTECH INDEX and HSIII Index rising above the cap of 8%/12% and passives will sell on 7 March.
• We estimate passive trackers will need to sell US$1.2bn of stock due to capping. Shorts have been increasing, and quarterly results will be announced on 20 February.

• Nearing the completion of 60% of the review period, there could be two changes for the BSE SENSEX Index (SENSEX INDEX) at the June rebalance.
• With one stock right at the cusp of deletion from the index, there could be a third change too. Sector balance will be used to decide the list of inclusions.
• The forecast adds outperformed the forecast deletes in the back end of 2024 but there has been huge underperformance this calendar year as stocks with nosebleed valuations have sold off.

• Mixue Group (MIX HK) has a whopping market share of 32.7% in 2023, based on number of cups sold. It also has the highest profit in the sector.
• With a strong profit record and net cash, it is a leader that captures industry growth. Its extensive network targets low-tier cities’ potential and the franchise model drives expansion.  
• It justifies trading on a premium to sector average PER of 19.6x for FY25. If aligning P/B with ROE on the best-fit line, it should be priced at 5.1x pre-money.

• Thai Beverage (THBEV SP)  reported marginal revenue growth and a slight decline in EBITDA for the December quarter (1QFY25), even as its spirits segment experienced a sharper drop in both.
• With its primarily Thailand-based spirits segment seemingly in a structural decline, growth in other segments must offset the impact on overall sales.
• With limited potential to unlock value from its beer division, particularly amid the sharp decline in BeerCo’s valuations, Thai Bev seems increasingly off investors’ radar.

• There was a HUGE jump in value traded this week – HK$655bn vs ~$300bn for 5-days of trading the last several weeks.
• Alibaba Group Holding (9988 HK) was the big buy with net buying 7 of 8 days post-CNY and a huge end of week. Tencent was sold.
• There appears to be a flight to Chinese equities by foreigners and SB are taking part with risk-on style trading. Watch Hang Seng rebal news this week!

• AH Premia are lower again (new 5yr low) in the first full week after the CNY holiday. HK stocks up BIG vs A-shares. H/A discounts slightly narrower on average.
• That tells you that the big winners in HK the past two weeks are those stocks without A-shares. This past week Healthcare sector pairs saw the best relative H-share performance.
• Foreigners returning to HK markets but less to the H in H/A pairs. They are buying HK/China “foreign-investor beta” not China breadth. Feels spivvy, and short-term.

• I tally 59 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma.
• Two new deals discussed this week: Paragon REIT (PGNREIT SP) and Kaonavi Inc (4435 JP).
• Key updates/news took place on: Arcadium Lithium (LTM AU), Sun Art Retail (6808 HK), HKBN Ltd (1310 HK), and Seven & I Holdings (3382 JP).

• Besides not showing concrete measures to increase corporate value, the feasibility of the plan and the valuation at that time are often not verified, so disclosures that don’t add up.
• Listed subsidiaries and equity method affiliates account for 31.8% of all listed companies. The company is still in the process of restructuring its business portfolio.
• The growth of each company’s corporate value and stock market capitalization will be determined by how quickly issues that have not been initiated so far are resolved.

• After NZME Limited (NZM NZ/AU), publisher of the NZ Herald, recently announced sweeping job cuts, the country’s largest private sector union called for the government to step in.
• The union said the cutbacks not only affected staff, but also readers seeking information on important issues. NZME’s revamped strategy focuses on stories that engage audience. Or clickbait by detractors. 
• Reports are now emerging of a possible takeover from local entrepreneurs. Those reports appear tenuous, at best.

• Yum!
• Brands’ recent earnings presentation offers insights into the company’s performance and strategic trajectory, highlighting both strengths and challenges.
• The company, encompassing renowned brands like KFC, Taco Bell, and Pizza Hut, presented a mixed set of results for the latest financial year, characterized by robust digital growth, strategic expansions, and cost management, contrasted by varied performance across different market segments.

• Hilton Worldwide Holdings Inc. provided a comprehensive overview of its performance in the fourth quarter and full year of 2024, demonstrating robust growth and strategic expansion across its hotel portfolio.
• The company reported strong financial results, including record unit growth, significant increases in revenue per available room (RevPAR), and notable expansion in strategic partnerships and brand diversity.
• For 2024, Hilton achieved a system-wide RevPAR increase of 2.7% compared to the previous year, showing growth across all segments and major regions.

• Harley-Davidson’s recent performance reflects a mixed bag of operational and strategic shifts amid challenging macroeconomic conditions.
• The company’s 2024 fourth-quarter results exhibited a significant decline, with consolidated revenue decreasing by 35% compared to the previous year.
• This decline was primarily driven by the Harley-Davidson Motor Company (HDMC) segment, which saw revenue drop by 47% as a result of a 53% decrease in wholesale shipments.

• Philip Morris International (PMI) delivered a notable performance in 2024, showcasing both strengths and challenges that investors should weigh.
• The company’s expansion in the smoke-free product sector, alongside resilient performance in combustible products, is a significant aspect of its strategy, supporting growth in both revenue and profitability.
• Positives from the 2024 results show strong momentum in smoke-free products, particularly IQOS, with substantial progress in markets like Japan and parts of Europe despite regulatory challenges such as the EU characterizing flavor ban.

• Revenue reached JPY11.5bn (+34.6% YoY), with significant growth in Second-hand Online and Mobile & Telecommunications segments.
• Operating profit turned positive at JPY249mn, with a 2.2% margin, despite JPY68mn relocation expenses.
• Revenue in the Media business declined by 19.4% YoY, impacted by changes in Google’s search algorithm.

• Performance Food Group Company (PFGC) reported its fiscal second-quarter results with a mixed performance reflecting both positive steps and ongoing challenges.
• The company’s organic growth of 5% in the independent restaurant case volume was a significant achievement, driven by market share gains and improving consumer conditions.
• However, this growth needs to be viewed in the context of difficult year-over-year comparisons, primarily due to calendar differences in December.

• Capri Holdings Limited’s recent earnings call highlighted several challenges and strategic pivots across its three primary luxury brands—Versace, Jimmy Choo, and Michael Kors.
• During the third quarter of fiscal 2025, the company experienced a 12% decrease in revenue compared to the prior year, amounting to $1.3 billion.
• This decline was primarily attributed to weakened demand for fashion luxury goods globally, with a notable downturn in China, along with strategic missteps and a store optimization program that affected sales.

• FY12/24 revenue increased 48.8% YoY to JPY13.5bn, with narrowing losses and a return to quarterly profitability.
• FY12/25 forecast projects 18.1% YoY revenue growth, JPY161mn operating profit, and focus on Mail Order DX Service.
• Key strategies include growing top 20 clients, accelerating new client acquisition, and utilizing generative AI for efficiency.

• Revenue increased by JPY248mn (+2.0% YoY), driven by growth in both domestic and overseas businesses.
• Operating profit declined JPY567mn (-44.0% YoY) due to higher costs and decreased profits in both markets.
• The company opened 10 new salons, increasing the total number of salons to 698 by end-Q2 FY06/25.

• Piolax Inc (5988 JP) is a small, low ROE, over-capitalised autoparts maker mostly making low-moat parts, but they sell A LOT of them. About a gajillion. 
• They started 100% div payout ratios 3yrs ago, and last year started a new MTMP to pay out 100% and then buy back a lot of stock. Murakami bought 10%.
• In November they launched a big buyback. Now they are launching a 23.78% Tender Offer Buyback where Murakami-san will sell. Big accretion on forward expectations downgrades. Hmmm… 🤨

• We believe in 2025 HK/China shall outperform EM. While the undervalued and under-owned characteristic of the China market is well-known, monetizability of China’s technological capabilities has become apparent only recently.
• Policy stimuli during the upcoming NPC could catalyze consumer sentiment and market performance. China’s structural hurdles, Debt, Demographics and Deflation, remain. But correct stock and sector selection can generate alpha.
• We prefer the internet platforms, consumer discretionary and high dividend yield, the latter largely SOEs. Our “China Twelve” are mostly reasonably valued (low teen PE), with double digit EPS growth.

• At an 8% discount to NAV, Melco International Development (200 HK) is trading too tight for what is a simple holding company structure.
• Preceding my comments on Melco are the current setup/unwind tables for Asia-Pacific Holdcos.
• These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%.

• Stock sale allows brokers to pass on to the company the attraction of being able to diversify its shareholders, and the cross-shareholding sales scheme allows them to obtain higher commissions.
• One of the solutions that companies have come up with in the absence of improved return on capital is to reduce their policy shareholdings.
• The use of share repurchases to buy back cross-shareholdings is a very good way to improve return on capital because it also reduces the amount of cash on hand.

• DigiPlus Interactive (PLUS PM) has seen remarkable performance lately, with its share price increasing by 20% this month, 32% YTD, and 300% since January 2024.
• The share price performance is driven by optimism over the company’s shortlisting for a Brazilian operating license and a recent broker upgrade with a bold price target of 55.4 pesos.
• Currently trading at 13.7x and 10.5x FY24/25 PE with an ROCE exceeding 35%, we anticipate the next catalyst will be the company’s strong FY24 earnings report in April.

• Dhampur Bio Organics (DBOL IN)’ Q3 FY25 revenue surged 74.33% YoY, fueled by robust sugar and country liquor performance amid increased sales volumes.
• The significant revenue growth indicates strong market demand and positions DBO to transition toward value-added sugar production, mitigating commodity risks.
• Despite operational challenges and declining EBITDA margins, DBO’s strategic focus on premiumization and improved cane development underscores resilient long-term growth potential.

• Megmilk Snow Brand’s cumulative Q3 FY03/25 revenue was JPY469.7bn (+2.0% YoY), with operating profit at JPY16.3bn (+0.0% YoY).
• Dairy Products segment revenue reached JPY197.8bn (+1.5% YoY), while operating profit was JPY8.0bn (+0.7% YoY).
• Beverages and Desserts segment revenue totaled JPY203.8bn (+3.8% YoY), with operating profit at JPY5.5bn (+0.4% YoY).

• Cumulative Q3 FY03/25 sales were JPY430.7bn (+1.8% YoY), with operating profit at JPY2.5bn (-8.9% YoY).
• Net income fell by 76.5% YoY due to reduced operating and recurring profits and absence of prior extraordinary gains.
• Sales increased across all business segments, but operating profits declined due to rising costs and promotional expenses.

• Revenue increased by 6.5% YoY, with operating profit and recurring profit growing 25.5% and 28.1% YoY, respectively.
• The company opened 20 new facilities, including nurseries and after-school clubs, expanding its child-rearing support facilities.
• Net income attributable to owners rose 36.6% YoY, driven by increased child enrollment and revised staffing ratios.

• Globus Spirits (GBSL IN)’ Q3 FY25 performance saw a 12.5% YoY revenue decline and significant cost pressures, while its consumer segment, especially luxury posted remarkable double-digit growth.
• After reduction of FCI price, Company anticipate achieving margins of Rs. 5-7 per liter from ethanol, aiming for a long-term average of Rs. 7 per liter.
• From Q4 onwards, manufacturing segment will also perform well along with growth in the consumer segment as well.

• Guming Holdings (1364 HK) ‘s shares closed 7% below issue price by end of yesterday’s trading. 
• Institutional investors may be cautious, with many likely waiting for the upcoming IPO of Mixue Group (MIX HK), widely viewed as a more attractive and bigger opportunity in tea space.
• The upcoming Mixue IPO—aiming to raise about USD500 million—could spark broader investor interest in the sector and may boost valuations for Guming given its relative operational strengths.

• Cautious but Credible – FY25 guidance underwhelms, but Shimano’s realism is justified. The bike market is recovering, even if 2025 will be a grind.
• Sitting on a Cash Pile – ¥530 billion in net financial assets, yet capital returns remain restrained. Investors will be watching for bolder moves.
• Quality Wins – mid-cycle ROIC north of 20% and end-market inventories normalising – a long-term winner at a fair price.

• The global auto industry faces significant tariff exposure. Option implied volatility offers a forward-looking assessment of risk.
• Chinese car makers started to increase in implied volatility more than the other markets at the beginning of February. They now show the highest risk.
• Recent implied volatility trends, asymmetric pricing (skew), and the term structure all seem to indicate that the Indian auto sector is the least exposed to international trade relations.

• Revenue decreased YoY in several segments, with notable declines in Content and Platform Businesses due to market trends.
• Operating losses were reduced across multiple segments, attributed to improved profitability and lower SG&A expenses despite revenue declines.
• Certain segments experienced revenue growth, driven by strong sales in Internet Media services and new platform developments.

• Murphy USA recently reported its fourth-quarter and full-year 2024 financial results, presenting a mixed performance and outlook.
• The company reported an EBITDA of just over $1 billion for 2024, indicating strong revenue capabilities despite several challenges throughout the year.
• The notable positives include growth in perstore merchandise sales and margin, along with robust retail fuel margins, which improved by 50 basis points to $0.281 per gallon.

• Revenue increased YoY across most segments, with Automotive Seating declining; operating profit rose, and GPM improved to 13.7%.
• Revenue increased YoY, narrowing losses; yen depreciation boosted yen-denominated earnings at overseas subsidiaries.
• Semiconductor market recovery increased sales of process components, while high-capacity HDD demand boosted HDD suspensions revenue.

• Orders increased by 10.3% YoY to JPY275.4bn, with revenue up 10.8% YoY to JPY247.8bn.
• Architecture segment orders rose 16.7% YoY, while Civil Engineering orders declined 13.0% YoY.
• Real Estate segment saw a 32.6% YoY increase in orders, with revenue rising 32.5% YoY.

• Cumulative Q3 revenue rose 0.2% YoY to JPY257.4bn, with notable growth in the Other business segment.
• Operating profit increased 8.0% YoY to JPY15.6bn, driven by price improvements and growth in core business segments.
• Transportation Equipment-related Operations faced a 23.1% YoY revenue decline in China, despite growth in other regions.

• Sales increased to JPY283.2bn (+4.0% YoY) driven by growth in Toys and Amusement segments despite declines elsewhere.
• Operating profit rose to JPY9.8bn (+26.7% YoY) with improved margins, despite a decline in the Video Games segment.
• Full-year targets for FY03/25 were raised, forecasting JPY360.0bn sales and JPY130.0 dividend per share.

• Revenue increased by 6.5% YoY, with operating profit and recurring profit growing 25.5% and 28.1% YoY, respectively.
• The company opened 20 new facilities, including nurseries and after-school clubs, expanding its child-rearing support facilities.
• Net income attributable to owners rose 36.6% YoY, driven by increased child enrollment and revised staffing ratios.